Chinese yuan to firm against US dollar on dovish Fed, expected trade deal: UBS

The Chinese yuan (CNY) would appreciate against the US dollar (USD) in the following 12 months due to a more dovish U.S. Federal Reserve and anticipated trade deal between the United States and China, according to the latest research note by Swiss multinational investment bank UBS AG.

The Chinese yuan (CNY) would appreciate against the US dollar (USD) in the following 12 months due to a more dovish U.S. Federal Reserve and anticipated trade deal between the United States and China, according to the latest research note by Swiss multinational investment bank UBS AG.

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UBS, in the research note published Wednesday, forecast that the exchange rate of USD against CNY would stand at 6.7:1 for the next three, six and 12 months versus earlier forecast of 6.9:1, 7.0:1 and 7.0:1, respectively.

The USD-CNY exchange rate of 6.7:1 would be the center of gravity in 2019, and it would fluctuate in the range of 6.5:1 and 6.8:1 in the coming months, according to UBS.

The downward adjustment of USD-CNY exchange rate forecast reflects anticipated partial rollback of trade tariffs as the United States and China are expected to close a deal and recent dovish rhetoric of the Federal Reserve, said UBS.

“We also believe that greater confidence in China’s growth trajectory, as activity stabilizes for now and financial assets in China see integration into international benchmarks, will lend support to the CNY,” UBS said.

The appreciation of Chinese yuan, Singaporean dollar, Egyptian pound and Nigerian naira offer the best expression of stronger currencies from emerging markets against the U.S. dollar as the Federal Reserve reinforced its patience and signaled the end of quantitative tightening, according to a research note by Bank of America Merrill Lynch on Friday.

The Federal Reserve on Wednesday left interest rates unchanged after concluding a two-day policy meeting, in a move that met market expectations and reflected the central bank’s patient approach regarding monetary policy changes.​(China Daily/Xinhua)

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